One of Myer’s biggest shareholders has cut its shareholding in the company since the department store’s plans to merge with David Jones were blown out of the water this month by a takeover offer from South Africa’s Woolworths Holdings.
In a substantial shareholder notice filed with the Australian Securities Exchange, Commonwealth Bank revealed its overall stake in Myer had fallen from 9.59 per cent to 8.2 per cent -- a difference of 8.2 million shares valued at more than $18 million.
The bulk of the selling followed DJs’ announcement on April 9 that it would recommend shareholders accept a $4-per-share takeover offer from Woolworths, rather than pursue Myer’s proposal for a “merger of equals” that would deliver no premium for DJs shareholders.
Myer shares spiked briefly that day amid expectations that other foreign bidders could also be seeking to buy into the Australian department store sector, but have since remained below the $2.30 at which they were trading prior to the Woolworths-DJs announcement.
Market watchers have also said Myer shares would be likely to attract buying interest from cashed-up DJs investors who wish to maintain exposure to the Australian department store sector after the Woolworths takeover goes through.
However, the sale of large parcels of shares by one of the company’s biggest shareholders would appear to undermine the inherent desirability of Myer’s stock and highlight the competitive threat posed by DJs following the Woolworths takeover.
Woolworths chief Ian Moir has said he will increase the in-house brands stocked by DJs from its current level of about 3 per cent to at least 20 per cent within two years, as part of a plan to boost DJs’ net profit by $130m over the next five years.
Myer has made private label -- which offers higher margins to the retailer while allowing them to sell at lower price points -- a major plank of its turnaround strategy, and in-house brands now account for about 20 per cent of sales revenue.
At a time when it is already facing increased competition from newly arrived international players such as H&M, Uniqlo and Zara, the prospect of 38 DJs stores all ramping up their presence in Myer’s strongest market segment is less than comforting.
The collapse of the DJs-Myer merger has also raised questions over the longevity of Myer boss Bernie Brookes, who was set to hand over the reins to a new chief executive this year before the merger talks led the board to offer him a renewed contract.
Mr Brookes has said he has no plans to retire, but his contract is open-ended rather than fixed-term and chairman Paul McClintock has said the re-appointment was aimed at providing “leadership clarity”.
Hedge funds have been active in trading David Jones shares, which surged by as much as 81c to $4 on the day the Woolworths takeover was announced, and have since traded no lower than $3.91.